Coca-Cola Porters Five Forces-SWOT Analysis.docx 

Porter’s Five Forces Sample Analysis Coca-Cola

Porter’s Five Forces Model is a framework for the analysis of an industry and

how a businesscan implement strategies to gain market value. The model

includes threats of new entrants,threats of substitute products, bargaining

power of the buyer, bargaining power of the supplier,and competitor rivalry. In this case, the

model is being utilized to analyze the global beverageindustry from Coca-

Cola’s perspective. Threats of New EntrantsThe level of new entrants is measured

by multiple factors including: brand loyalty, advertisingability, access of

distribution channels, and supplier availability. These factors create a low tomoderate

threat of new entrants.

 Customer and brand loyalty make it very problematic

for new competitors to enter intothe beverage industry. Coca-Cola is the most

known beverage brand throughout theworld, which has been made possible

through advertising and marketing.

 Advertising and marketing

are a key component for a new company to gain recognitionfrom consumers.

However, both these components require large amounts of funding to produce broad scale

marketing campaigns that will gain the recognition needed tocompete with industry

leaders, such as Coca-Cola.

 Access to distributing channels is an important factor when

entering into a new market. Itcan be tiresome for new entrants to find retailers that will carry

their product before theyare established. Shelf space will rarely be made for products

that cannot prove they haveconsumers to regularly buy their product.

 

Coca-Cola and other industry leaders have strict bottling contracts in all of their salesareas.

These contracts block the bottling company from doing business with companies pr

oducing a similar product. One of the only alternatives for the new company is to dothe

bottling themselves, which requires high amounts of capital.8Threats of Substitute Products

In the beverage industry there are many substitutes for each category of

beverage. This allowsthe consumer to help shape what the retailers put on the

shelves. Examples of these substitute 

 products compared to Coca-Cola are: Pepsi

products, beer, wine, tea, coffee, energy drinks, etc.The substitute products

create a moderate threat in the industry.

 Marketing and advertising,

again, have a major impact on the substitute products. If theconsumers do not

know about a particular product, then retailers do not want to stock that product.

 

The switching cost for retailers is fairly low, so retailers can easily switch to

more popular products. This can create an advantage for the retailer from a cost

standpoint andfor the producers of the substitute product.

 

Throughout the beverage industry, product lines are very similar in price betweencom

peting companies. Differentiation techniques are taken so consumers will choosetheir

product. This can give substitute products the opportunity to use promotional

influences to gain consumers’ favor. Bargaining Power of Buyers

Buyers make up an important aspect of the beverage industry. Some of these buyers

include: fastfood fountain, vending, convenience stores, and super markets. The

bargaining power of the buyer is low to moderate.

 Fast food chains have

the highest bargaining power out of the other buyers, simply because they buy in bulk. This

method of purchasing provides the least profit for Coca-Cola due to small margins. It is more for the

customer to sample the product and grow aloyalty toward the brand name.

 

Vending machines provide a straight line approach from getting the product directly

intothe hands of the consumer. There is literally no bargaining power for the buyer.

 Convenience stores, like vending machines, have no bargaining power. The

reason for this low bargaining power is because convenience stores pay inflated

prices for the products since they are buying smaller quantities.

 

Super markets have low bargaining power. The power they possess is best shelf

space, but consumers usually make the final decision of the most popular products.8

Bargaining Power of SuppliersThe bargaining power of the suppliers, in the beverage

industry, is very low because theingredients used to create these beverages

are readily available. 

 The basic materials used to make Coca-Cola products are

easily found with manysuppliers. This ease of access gives a huge advantage to Coca-Cola

because the companycan set their own prices with the suppliers.

 Switching costs are also

very low, so the ability for manufacturers to change suppliers iseasily done.

 

There is great emphasis put on the buyer industry to suppliers. The industry utilizes

largequantities of raw materials the suppliers must remain in good standing with the buyers.

Competitor RivalryThe intensity of rivalry among competitors differs by the industry. In

the beverage industry thelevel of rivalry is relatively moderate. The main reason for

this is the number of major playerscontrolling the market share. These players are

Coca-Cola and PepsiCo.

 Brand loyalty is a determinant of the rivalry between com

petitors. In the end theconsumers chooses the product, so the rivalry comes in the form of

advertising andmarketing strategies to gain market value.

 

Products in the industry are easily differentiated. This differentiation lowers the level

of rivalry because each company is trying to create the next product that will have

highconsumer reviews.

 The ability for consumers to control the market

greatly boosts competitor rivalry.Because stores stock their shelves with the most

popular products, competitors are alwaysfighting for their product to be the most

popular and easiest to recognize.

 Expansion opportunities are one of the major

factors affecting rivalry. The best way togain market share is to enter into a market

that is not already occupied by strongcompetitors. 

SWOT Sample AnalysisCoca

-ColaSWOT AnalysisThe following table outlines an analysis of the strengths, weaknesses,

opportunities, andthreats of The Coca-Cola Company. This SWOT analysis identifies the positive and

negativeaspects of Coca-Cola as well as opportunities and threats in the external

environment. A moredetailed description of each of these items is discussed in

the following text.EvaluationEnvironmentPositive NegativeInternalStrengths 

 Strong Brand Identity

 Various Product Lines

 

Globalization

 Large Distribution Network 

 

Highest Market Share in CSDWeaknesses

 Brand failures (New Coke)

 Product recalls damaging brand image

 Destocking of Coca-

ColaProductsExternalOpportunities

 Increasing bottled water consu

mption globally

 Acquisition of CCE

 

 New product penetration

 Potential growth outside U.S.

 

 NARTD market growthThreats 

 

Biggest competitor: Pepsi

 Increasing cost of raw material

 Reduced demand worldwidedue to health concerns & purchasing power 

 Changes in consumer  preferencesStrengths

 Coca-Cola has been

accepted as a part of American culture for over a century. One of the biggest

strengths of Coca-Cola is the company’s brand recognition. The Coca

-Cola brand image is displayed on items ranging from clothing to souvenirs, and

thisrecognizable branding helps distinguish Coca-Cola from competitors.

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